A summary balance sheet for the partnership of Maddy,Nelson and Olsen on December 31,2011 is shown below.Partners Maddy,Nelson and Olsen allocate profit and loss in their respective ratios of 9:6:10.
The partners agree to admit Poosh for a one-tenth interest.The fair market value for partnership land is $180,000,and the fair market value of the inventory is $150,000.
Required:
1.Record the entry to revalue the partnership assets prior to the admission of Poosh.
2.Calculate how much Poosh will have to invest to acquire a 10% interest.
3.Assume the partnership assets are not revalued.If Poosh paid $200,000 to the partnership in exchange for a 10% interest,what is the bonus that is allocated to each partner's capital account?
Definitions:
Statute of Frauds
A legal principle requiring certain types of contracts to be in writing and signed by the party to be charged, to be enforceable.
Oral Agreement
A verbal commitment between parties that is not recorded in written form but may still be legally binding.
Collateral
Assets pledged by a borrower to secure a loan or other credit, and subject to seizure on default.
Original
In legal and official documents, "original" refers to the first form or version of a document that has not been copied, altered, or replicated.
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